Cost of Capital Online Exam Quiz

Important questions about Cost of Capital. Cost of Capital MCQ questions with answers. Cost of Capital exam questions and answers for students and interviews.

During the planning period, a marginal cost for raising a new debt is classified as

Options

A : a. debt cost

B : b. relevant cost

C : c. borrowing cost

D : d. embedded cost

The cost of common stock is 14% and the bond risk premium is 9% then the bond yield will be

Options

A : a. 0.0156

B : b. 0.05

C : c. 0.23

D : d. 0.6428

A risk associated with the project and the way considered by well diversified stockholder is classified as

Options

A : a. expected risk

B : b. beta risk

C : c. industry risk

D : d. returning risk

The cost of common stock is 13% and the bond risk premium is 5% then the bond yield would be

Options

A : a. 18

B : b. 0.026

C : c. 0.08

D : d. 0.18

The variability for the expected returns for projects is classified as

Options

A : a. expected risk

B : b. stand-alone risk

C : c. variable risk

D : d. returning risk

The cost of common stock is 16% and the bond yield is 9% then the bond risk premium would be

Options

A : a. 0.07

B : b. 7

C : c. 0.0178

D : d. 0.25

If the future return on common stock is 14% and the rate on T-bonds is 5% then the current market risk premium will be

Options

A : a. 0.19

B : b. 0.09

C : c. 9

D : d. 19

The cost of capital is equal to required return rate on equity in the case if investors are only

Options

A : a. valuation manager

B : b. common stockholders

C : c. asset seller

D : d. equity dealer

The interest rate is 12% and the tax savings (1-0.40) then the after-tax component cost of debt will be

Options

A : a. 0.072

B : b. 7.2 times

C : c. 17.14 times

D : d. 17.14

The retention ratio is 0.60 and the return on equity is 15.5% then the growth retention model would be

Options

A : a. 0.149

B : b. 0.2584

C : c. 0.161

D : d. 0.093

The method uses for an estimation of cost of equity is classified as

Options

A : a. market cash flow

B : b. future cash flow method

C : c. discounted cash flow method

D : d. present cash flow method

The method in which company finds other companies considered in same line of business to evaluate divisions is classified as

Options

A : a. pure play method

B : b. same play method

C : c. division line method

D : d. single product method

The bond risk premium is added in to bond yield to calculate

Options

A : a. cost of American option

B : b. cost of European option

C : c. cost of common stock

D : d. cost of preferred stock

The stock selling price is $45, an expected dividend is $10 and an expected growth rate is 8% then cost of common stock would be

Options

A : a. 55

B : b. 58

C : c. 53

D : d. 0.3022

The dividend per share is $18 and sell it for $122 and floatation cost is $4 then the component cost of preferred stock will be

Options

A : a. 0.1525

B : b. 0.1525 times

C : c. 15.25

D : d. 0.001525

In weighted average capital, the capital structure weights estimation does not rely on the value of

Options

A : a. investors equity

B : b. market value of equity

C : c. book value of equity

D : d. stock equity

The interest rates, tax rates and market risk premium are the factors which an/a

Options

A : a. industry cannot control

B : b. industry cannot control

C : c. firm must control

D : d. firm cannot control

If the payout ratio is 0.45 then the retention ratio will be

Options

A : a. 0.55

B : b. 1.45

C : c. 1.82

D : d. 0.45

The stock selling price is $35, expected dividend is $5 and expected growth rate is 8% then cost of common stock would be

Options

A : a. 40

B : b. 0.2229

C : c. 0.1428

D : d. 80

The retention ratio is 0.55 and the return on equity is 12.5% then the growth retention model would be

Options

A : a. 0.1195

B : b. 0.06875

C : c. 0.1305

D : d. 0.2272

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